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Global Asset Flows Rebound Across the Board in 2017

Favorable market conditions globally attracted the greatest flows in more than a decade

Kevin McDevitt, Morningstar Research Services LLC

 

Global net flows reached nearly $2 trillion in 2017, due largely to favorable conditions across capital markets. This $1.97 trillion total was led by nearly $800 billion in estimated U.S. flows.

After total flows fell in both 2015 and 2016 year over year, 2017 saw the largest inflows in a decade—more than double 2016’s $835 billion in estimated flows.

In our Global Asset Flows Report, we looked at 2017 flows across asset classes, fund families, and active versus passive funds. This report analyzes the flows that investors placed in global open-end funds and exchange-traded products in 2017 and what these trends reveal about past performance, as well as investor behavior and expectations going forward.

How we broke down 2017 global asset flows:

  • Asset classes: In terms of asset classes, 2017’s rebound in flows was driven by equity and fixed income. Fixed income garnered the greatest flows with an estimated $830 billion. Equity funds followed with an estimated $580 billion and allocation funds collected about $190 billion. Fixed-income flows impressed with the second-largest organic growth at 12.6%; only alternative funds showed greater organic growth, at 13.4%. Equity-fund demand rebounded in 2017 after net outflows of $33 billion in 2016. With global equity markets soaring in 2017, demand roared back. Asia, the only major region with equity inflows in 2016 at about $48 billion, sustained its interest in equities with $72 billion in inflows. The U.S. showed the greatest rebound. After slight equity outflows in 2016, U.S. investors directed nearly $300 billion into equity funds. What’s notable, however, is that about $240 billion of these flows went to international equity funds, with the remainder going to fund focused on U.S. equities.
  • Fund families: BlackRock led the industry with about $400 billion in inflows, thanks largely to its iShares exchange-traded funds. Vanguard followed closely with $385 billion in inflows, but BlackRock’s flows grew at nearly twice Vanguard’s organic rate: 19.5% versus 10.1%. PIMCO came in third with about $100 billion in inflows, a huge improvement over 2016 and a 24.5% organic growth rate, the best among the 10 largest fund firms.
  • Active versus passive funds: Passive funds continued to take market share from their active counterparts. Overall, the U.S. has the greatest percentage of passive assets at 32%, followed by Asia (28% passive) and Europe (19% passive). Passive equity market share grew across all major regions. However, passive fixed-income funds proved less popular, gaining significant market share only in the U.S., growing market share from 28% to 30%.

Rallying equity markets, subdued volatility, and stable interest rates appear to have lifted investor confidence worldwide. While all asset classes saw inflows, investors showed a preference for fixed-income funds in a stable rate environment.

Please see below for important disclosure.

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Important Disclosure

The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission.

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